28.9 The estimates of gross State product are produced by summing the income components of gross State product: compensation of employees, gross operating surplus, gross mixed income, and taxes less subsidies on production and imports. Total factor income is derived by summing compensation of employees, gross operating surplus and gross mixed income. Estimates of total factor income by State and Territory are compiled by industry at the ANZSIC Division level. However, State by industry estimates are not available for gross State product as industry estimates are not available at the State level for taxes less subsidies on production and imports.

Compensation of employees

28.10 State by industry estimates of compensation of employees (COE) are derived from essentially the same data sources as those used for the national estimates. They are derived as the sum of the following five elements:

private sector wages and salaries, which consist of wages and salaries paid to employees of the private sector and are obtained from the quarterly survey of employment and earnings (SEE); non-farm wages and salaries, which are out of scope of SEE (referred to as unrecorded wages); farm wages and salaries; the value of fringe benefits paid to private sector employees; and labour income earned by non-residents working for the residential non-official sector in Australia;

government wages and salaries, which consist of wages and salaries paid to government employees (obtained from SEE); defence force salaries and allowances; the value of fringe benefits paid to government employees; payments to the staff of Australian embassies and consulates overseas; labour income earned by non-residents working for the residential official sector abroad less labour income earned by residents working for non-resident employers in Australia;

28.11 Not all the information is available on a State by industry basis, so a matrix consisting of available State by industry data is constructed for total compensation of employees. The matrix is balanced to two sets of control totals using a mathematical estimation technique known as the residual allocation system (RAS). The first control total is the total of all industries for each State or Territory, while the second is the total of each industry for all States and Territories combined. RAS is a procedure which requires the successive scaling of column and then row elements by successively prorating to column totals and row totals until the matrix elements are fully reconciled with both row and column control totals. The number of iterations required will depend on the consistency of the initial data matrix with the row and column control totals. The accuracy of the final matrix derived will depend on the suitability of the initial matrix as an indicator.

28.12 There is a minor difference in definition between COE in the gross product tables and the household income tables, for both the national and the State estimates. The reason for this difference is discussed in Chapter 19.

Gross operating surplus plus gross mixed income

28.13 Estimates of gross operating surplus (GOS) plus gross mixed income (GMI), by State and industry, are generally derived by allocating the national industry estimates of GOS plus GMI by State. However, GOS for general government is allocated by State only in total, not by industry. Consequently, the sum of GOS for non-financial corporations, financial corporations and dwellings owned by persons, and GMI for unincorporated enterprises, is allocated by State for each industry other than public administration and defence. The abbreviation 'GOSMI' will be used in the following discussion to represent the aggregate GOS (excluding GOS for general government) plus GMI.

28.14 Taxation Statistics are the principal data source for national estimates of GOS for private non-financial corporations and non-farm unincorporated enterprises for years up to 1993-94. For later years, EASTAX data (combined data from the Economic Activity Survey and the business income tax source) are used to compile annual balanced supply and use tables which provide the annual industry benchmarks. Taxation Statistics are not suitable as a data source for State estimates for non-financial corporations, as the taxation return for an individual company relates to the legal entity, which may be engaged in production in more than one State. The major data sources used in deriving State GOSMI estimates are ABS economic censuses and surveys, government finance data, Taxation Statistics, and other indicators such as wages and salaries and employment data.
28.15 The ABS system of integrated economic censuses and surveys collects State data for selected industries on either an establishment or a management unit basis. Where available, they are used as the basic data source for allocating GOSMI by State.

28.16 The methods used for estimating GOSMI by industry by State are summarised below. Since the compilation methods vary between industries, an industry by industry description is given. The industries referred to are based on the industry classification described in Australian and New Zealand Standard Industrial Classification (ANZSIC) (Cat. no. 1292.0).

Agriculture, forestry and fishing

28.17 Agriculture GOSMI by State is obtained as a by-product of national statistical estimation. The methods and data sources used to derive State estimates are much the same as those used to derive estimates for Australia. Except for the latest year State splits of the gross value of production and farm costs are obtained respectively from Agriculture, Australia (Cat. no. 7113.0) and the Agricultural Finance Survey. For the latest year the only State estimates that are available are volumes for major crops (from ABARE) and ABS data on livestock slaughterings. For all other components of production and for all farm costs State estimates for the latest year are based on the State distributions from the previous year. Estimates of GOSMI for forestry and fishing are allocated to States in line with income tax-based estimates of GMI for unincorporated enterprises classified to forestry and fishing. GOS for State and local public non-financial corporations classified to forestry and fishing are allocated to States directly using data provided by the ABS Public Finance Section.

Mining

28.18 ABS economic censuses and surveys data (from Mining, Electricity and Gas Operations, Australia, Preliminary (Cat. no. 8401.0) and Mining Operations Australia (Cat. no. 8415.0)) for mining value added less wages and salaries by State are used to derive State splits of the Australian total for mining GOSMI. Bass Strait and North West Shelf oil and gas production are regarded as occurring on the domestic territory of Victoria and Western Australia, respectively. Oil and gas production in the Timor Gap is divided between the Northern Territory and Western Australia on the basis of which State has administrative control under the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990.

Manufacturing

28.19 Industry gross value added less wages and salaries by State, from Manufacturing Industry, Australia (Cat. no. 8221.0), is used to derive State splits of the Australian total for manufacturing GOSMI.

Electricity, gas and water supply

28.20 Estimates for GOS of public non-financial corporations by State are derived from the same sources as those used for the national estimates. For public non-financial corporations, government finance information, which is based on the enterprise as the statistical unit, is supplemented by information from economic censuses and surveys to transfer the coal mining activities of some State electricity authorities to the mining sector. GOS of the Snowy Mountains Hydro Electricity Authority is allocated wholly to New South Wales. The remaining portion of GOSMI is allocated to States using economic censuses and surveys data from Electricity, Gas, Water and Sewerage Industries, Australia (Cat. no. 8208.0).

Construction

28.21 The Australian total for GOSMI is allocated to States using benchmark data from Private Sector Construction Industry: Private Sector Construction Establishments, Details of Operations, Australia (Cat. no. 8772.0). Data are interpolated between benchmarks and extrapolated after the latest benchmark using a composite indicator derived from the following components:

State data for the value of work done by the private sector for the public sector, obtained from Engineering Construction Activity, Australia (Cat. no. 8762.0); and

State data on gross fixed capital formation for dwellings, and for other buildings and structures.

Wholesale trade

28.22 Benchmark estimates for GOSMI for 1991-92 were derived using Retail Census data for that year, as the ABS collection for the wholesale industry in respect of that year did not provide any State information. Retail turnover from Retail Trade, Australia (Cat. no. 8501.0) is used to extrapolate the 1991-92 State estimates of GOSMI.

Retail trade

28.23 Benchmark data to allocate the Australian total for GOSMI across States for 1991-92 were obtained from Retail Industry, State and Territory Summary (Cat. no. 8625.0). These benchmarks are extrapolated on the basis of indicator data comprising retail turnover from Retail Trade, Australia (Cat. no. 8501.0).

28.25 GOS for State and local public non-financial corporations is directly allocated to States using data supplied by the ABS Public Finance Section. Because the activity of national public non-financial corporations crosses State borders, indirect indicators are used to allocate GOS of this subsector to States. The remaining GOSMI is split into components of transport and storage which are then allocated to States using a variety of activity indicators. Examples of these indicators include domestic and international passenger traffic through Australian airports from the Department of Transport and Regional Services, overseas shipping and cargo movements, appropriate components of household final consumption expenditure by State, household income by State and in some cases mean population by State.

Communication services

28.26 Public non-financial corporations GOS is split by State using wages and salaries data for Telstra and Australia Post. The remaining portion of GOSMI is allocated to States using appropriate components of household final consumption expenditure.

Finance and insurance

28.27 Labour force employment data by State by ANZSIC Subdivision for this industry are used for the State allocation of Australian control totals for GOSMI.

28.29 The latest reference year for which these publications are available is 1995-96, except for Cat. no. 8676.0 which related to 1992-93. For subsequent years it has been possible to update the State allocations for the real estate component using State data for ownership transfer costs. Similarly, consulting engineering has been updated using State data on the value of work done from the quarterly publication Engineering Construction Activity, Australia (Cat. no. 8762.0). Apart from real estate and engineering, State ratios for the other components of property and business services have been held constant since 1995-96.

Education

28.30 Household final consumption expenditure on education by State is used to split the Australian total for GOSMI by State.

Health and community services

28.31 Australian estimates of GOSMI are calculated separately for health and for community services. Household final consumption expenditure by State for doctors, hospitals and dentists is used to split the Australian estimate for health GOSMI by State. Movements in mean population are used to extrapolate 1995-96 benchmarks for community services by State which were derived from Community Services, Australia, Preliminary (Cat. no. 8694.0). The respective State estimates for health and for community services are then summed to derive the State estimates for health and community services.

Cultural and recreational services

28.32 Public non-financial corporations GOS is allocated to States using data supplied by ABS Public Finance Section. The private sector portion of GOSMI is allocated to States using a variety of economic activity indicators. These indicators include HFCE admissions data by State, HFCE other recreation data by State, HFCE gambling data by State, and radio and television stations GOS by State from the Australian Broadcasting Tribunal Annual Report.

Personal and other services

28.33 Public non-financial corporations GOS is allocated to States using data supplied by ABS Public Finance Section. HFCE on other services is used as an indicator to derive the State split of private sector GOSMI.

Ownership of dwellings

28.34 State estimates of GOS for ownership of dwellings are derived using the same data sources and methodology as used for the national estimates (see Chapter 20).

General government

28.35 General government GOS comprises only consumption of fixed capital (COFC) and is allocated to States in two parts. The total State and local government component of COFC is allocated to individual States using a simple model based on an accumulation of State and local government gross fixed capital formation since 1961-62. The allocation of national general government COFC to individual States is based on a similar model of accumulated gross fixed capital formation since 1961-62.

Taxes less subsidies on production and imports

28.36 Taxes and subsidies on production and imports relating to the State and local general government sector are allocated directly to the State in which they are collected or paid. It is assumed that all production taxes collected by a particular State government are paid by entities resident in that State, and that any subsidies paid by a State government are paid to resident entities of that State.

28.37 Taxes and subsidies on production and imports relating to the Commonwealth Government are allocated to States at a detailed level using the most appropriate indicators available for each tax or subsidy. Commonwealth taxes on agricultural products are allocated by State using production data which are generally published in Livestock Products, Australia (Cat. no. 7215.0). Examples follow of the sources used for allocation of Commonwealth taxes and subsidies. Taxes on international trade are allocated by State using data from the ABS International Trade Section. Sales tax is allocated by State using appropriate components of HFCE. The mining diesel fuel rebate subsidy is allocated by State using data published in Australian Mining Industry (Cat. no. 8414.0). Most agricultural subsidies are allocated in line with the gross value of farm production for the relevant commodity.

Agricultural income

28.38 State estimates of agricultural GOSMI and agricultural income are derived by dissecting the Australian estimates for the relevant components. Gross value of production is available by State in Agriculture, Australia (Cat. no. 7113.0). Production costs (marketing, seed and fodder, and other costs) and the production valuation adjustment are distributed by State using area and production statistics in Agriculture, Australia (Cat. no. 7113.0), and in Livestock Products, Australia (Cat. no. 7215.0). Compensation of employees is available by State from the Agricultural Finance Survey. Estimates of consumption of fixed capital, interest and land rent are allocated to States using information from Taxation Statistics as an indicator. The taxes less subsidies on production and imports component is split by State using gross value of production data for relevant commodities.

Household income

28.39 State estimates of household income and uses of income are derived by aggregating separate State estimates for each of the components. Except for COE and GOS from dwellings owned by persons, State estimates are derived by dissecting the Australian estimates, using a variety of indicators.

28.40 State estimates of COE are an aggregation of the quarterly estimates described below. There is a difference between COE estimates in the household income account and in the gross domestic product account. The former account measures COE earned by residents of Australia; the latter account measures COE paid out of Australian production (see paragraph 28.53 for a description of the adjustments made for labour income to and from overseas).

28.41 Estimates of GMI by State are obtained by adding the agriculture and non-agriculture components, which are compiled separately. State estimates of GMI of agricultural unincorporated enterprises are derived as the difference between total agricultural GOS (discussed above) and agricultural GOS of non-financial corporations, which is split by State in the same proportion as total agricultural GOS. GMI of non-agricultural unincorporated enterprises is dissected by State using the proportions calculated from Taxation Statistics.

28.42 State estimates of GOS from dwellings owned by persons are prepared using the same data sources and methodology used to prepare the national estimates (see Chapter 20). Transfers from general government are allocated to States using data from the following publications of the Commonwealth Department of Social Security: the June issue of Characteristics of Pensioners, the quarterly Survey of Unemployment Recipients and the six-monthly Summary of Statistics. Interest imputed on life insurance funds is allocated to States using the aggregate for all other components of household income as an indicator, while interest imputed on private and public superannuation funds is distributed using the respective State distributions of compensation of employees for the private and public sectors. Interest imputed to households in relation to the Commonwealth Government's unfunded superannuation arrangements is allocated to States using Commonwealth general government compensation of employees.

28.43 The other components of household income and uses of income are distributed to States using the following indicators:

Taxation Statistics, for income tax payable, property income payable by unincorporated enterprises and the property income receivable component of primary income receivable;

data from the ABS Public Finance Section, for social assistance benefits, current transfers to non-profit institutions and other current taxes on income, wealth, etc.;

financial enterprises data on depositors' balances and personal and housing loan commitments, for property income payable on dwellings and consumer debt interest;

data from the ABS Balance of Payments Section for other current transfers receivable from and payable to non-residents (included within other current transfers receivable and payable); and

data on the gross value of agricultural production for the rent on natural assets component of other property income.

Household final consumption expenditure

28.44 Annual estimates of household final consumption expenditure by State are the sum of the quarterly estimates described in paragraphs 28.55 and 28.56.

Private gross fixed capital formation

28.45 Annual estimates of private gross fixed capital formation by State are the sum of the quarterly estimates described in paragraphs 28.57 and 28.58.

National general government final consumption expenditure and gross fixed capital formation

28.46 The treatment of national general government final consumption expenditure in regional accounting is rather problematic. Alternative treatments are to attribute final expenditures to the region in which the expenditure was incurred, or to the region in which the beneficiaries reside, or even to consider the national general government consumer unit as extraterritorial and therefore to exclude it from all regions. For practical reasons the first approach has been adopted, although it still requires extensive use of indirect indicators. An implication is that a large proportion of the consumption of national general government services is included in State final demand (SFD) for the Australian Capital Territory, inflating the balancing item for that Territory. If data were available to allocate national general government final consumption expenditure to end users, the balancing item for the Australian Capital Territory would be a much smaller negative, or even a positive, because the provision of the services would be regarded as an interstate export instead of consumption expenditure in the Australian Capital Territory. Estimates for national general government expenditures in the States, on both an annual and a quarterly basis, must therefore be treated with considerable caution.

28.47 The COE component of national general government final consumption expenditure is directly apportioned to States using data from the ABS Survey of Employment and Earnings and information supplied by the Department of Defence. Expenditures on goods and services classified to defence are allocated according to population, while non-defence purchases are allocated on the basis of national general government employment by State and Territory.

28.48 National general government gross fixed capital formation on dwellings and other buildings and structures is allocated to States and Territories using historical annual State dissections for projected construction expenditure in each State and Territory, published by the Department of Industry, Science and Resources. Expenditure on machinery and equipment is allocated using national general government employment by State and Territory. Expenditure on intangible fixed assets is allocated to States using a variety of allocators. Intangible fixed assets comprise computer software, mineral exploration, and artistic originals. Expenditure on computer software is based on estimates derived from Government Use of Information Technology, Australia, 1993-94 (Cat. no. 8119.0), from the value of imported software, from data supplied by the ABS Public Finance Section, and from data collected in respect of expenditure on computers and computer software associated with activities to ensure that the Commonwealth public sector was Year 2000 compliant. Expenditure on mineral exploration is based on data from Mineral and Petroleum Exploration, Australia (Cat. no. 8412.0). Expenditure on artistic originals is based on reports supplied by the Australian Film Commission, and on data from Film andVideo Production and Distribution, Australia (Cat. no. 8679.0). State dissections of expenditure on intangible fixed assets are based on the sources listed above or more general indicators if actual State details are not available.

State and local general government final consumption expenditure and gross fixed capital formation

28.49 Data for State and local general government final consumption expenditure and gross fixed capital formation are supplied by the ABS Public Finance Section. State general government data are extracted from administrative by-product sources such as financial statements prepared for State government budget papers and Auditors'-General Reports, and supplementary departmental documents, and by direct collection from general government units. The extracted data are coded using the Government Finance Statistics (GFS) standardised classification framework, which allows data for individual units to be aggregated to the required level. For local government final consumption expenditure, an annual ABS questionnaire is used to collect data from local government authorities in some States, while in others the data are jointly collected through the Commonwealth Grants Commission or the State Department of Local Government. A joint ABS/Commonwealth Grants Commission annual return on capital formation is collected from each local government authority in Australia. Gross fixed capital formation transactions are classified by type of asset and purpose. Data are allocated directly by State on the assumption that each State's activities are confined within its own borders.

28.50 For Commonwealth non-financial corporations' gross fixed capital formation on tangible fixed assets, various allocators are applied at the individual corporation level. Direct allocation is possible in a few cases where corporations operate wholly in one State. For some corporations State-level direct indicators are available from either the ABS Engineering Construction Survey or from published accounts. For other corporations, indirect allocations are used - for example, purchases of ships and aircraft are allocated using general freight and passenger activity through ports and airports in each State, consistent with the allocation of gross operating surplus for the Transport industry. Data for Commonwealth financial corporations are allocated by State on the basis of population. Data for State and local non-financial corporations are allocated directly to their State of operation. Gross fixed capital formation for State and local public financial corporations is allocated by State using data from the annual Public Financial Corporations Survey of Capital Expenditure. State dissections for capital expenditure on software are based on data from Information Technology, 1995-96 (Cat. no. 8126.0).

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